Invest in Natural Gas

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

First Trust Natural Gas ETF (FCG) is a straightforward exchange-traded fund (ETF) which invests in the natural gas space.

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It can include companies involved in the exploration, as well as the production side of the natural gas business. FCG was the first fund on the market offering this type of exposure in 2007.

Master limited partnerships (MLPs), publicly listed limited partnerships that trade on a national securities exchange, are limited to 15% of FCG’s portfolio, and the fund’s holdings are chosen and weighted by market cap and daily trading volume.

Those who have paid attention to the fortunes of the energy sector in recent times may not be surprised to learn that FCG is up 53.14% over the last year. This rise represents quite a windfall for its investors, particularly given the underwhelming performance of the overall market during the same period, with the S&P 500 down 15%. At a peak around June, the fund was up 90% for the year. Performance in the latter half of the year has been mixed.

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Though FCG, like the energy market at large, has not yet recovered to the heights it held when the sector was more in favor, it may now represent an opportunity. It offers a 2.6% dividend yield, and its expense ratio is 0.60%. Assets under management total $897 million.

Chart courtesy of www.StockCharts.com

The fund currently holds a total of 52 companies, most based in the United States. Among the largest positions are Hess Midstream LP (HESM), 5.05%; DCP Midstream LP (DCP), 4.93%; Western Midstream Partners LP (WES), 4.54%; ConocoPhillips (COP), 3.96%; and EOG Resources, Inc. (EOG), 3.86%. The top 10 holdings account for 40% of the fund’s assets.

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As always, investors should consider the fund’s features carefully and weigh what its holdings have to offer before adding it to their portfolios. First Trust Natural Gas ETF (FCG) represents a simple approach to investing in natural gas and companies in that industry.

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